CPA Exam Lab
Section 1: 40–50%B1

Financial Statement Analysis and Ratios

Exam Insight

BAR leans heavily on ratio computation and interpretation — examiners hand you two financial statements and expect a clean current ratio, DSO, or DuPont-decomposed ROE. Knowing the exact numerator and denominator of each ratio is the difference between a fast point and a guess.

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What AICPA Wants You to Know

  • 1Compute and interpret the core liquidity ratios (current, quick, cash)
  • 2Calculate activity ratios and convert turnovers into days (DSO, days inventory, days payable, operating and cash cycles)
  • 3Apply solvency and leverage ratios (debt-to-equity, debt ratio, times-interest-earned)
  • 4Compute profitability ratios (gross/operating/net margin, ROA, ROE)
  • 5Decompose ROE using the three-step DuPont model
  • 6Perform horizontal, vertical, and common-size analysis